16

I've noticed that while some (U.S.) employers start health insurance on day 1 of your new job, others start after 30 days, 60 days, or on the 1st of next month.

Obviously this state of affairs doesn't benefit the employee, so whom does it benefit, and how? Does it make the insurance cheaper? Do some health insurance companies or plans require this? Is it just a way to avoid paperwork for employees who quit quickly?

  • It would be interesting to know when is insurance fraud on the job most likely to occur. Maybe in the first couple of months? – user8365 Aug 20 '13 at 19:47
7

The insurance company is often the one making this rule. I own a firm in Canada, we provide health insurance to our staff for things not covered by universal health care, such as prescriptions and glasses, and our insurance made this rule, not us. I believe that applies to others too.

I think in addition to the scenario Paul Brown mentioned, it also helps to keep owners from adding friends/family to the payroll for just a few days to get something covered, then dropping them again. Or to be more accurate, policies that only cover people who have been with the company for a minimum period of time are cheaper than those that cover everyone from day 1. The smaller the company, the more impact this distinction will have.

12

There are a couple of reasons a company may not add an employee to insurance immediately:

  • The paperwork for the HR department or insurance company is a lot easier to deal with on an incremental basis, so only adding new workers to the benefits when paying the next bill prevents the complexity of partial billing.
  • A waiting period prevents new workers from accepting a new job, using the benefits and then simply quitting the job leaving the company to pay the bill. This is the argument for keeping preexisting condition in insurance policies too.
  • The company may quickly discover you are a bad hire and will have saved time and effort letting you go.
10

There are two scenarios in your question:

  1. 30/60 days: You may not work out in the job. You may not like the job and not come back. There are likely penalties to remove someone just added to insurance, so let's wait until the everyone is committed.
  2. 1st of Month: The insurance company may not be geared up to add someone immediately. There is likely a cut off date, and all changes will take effect from 1st next month.

So it depends on the deals/procedures of the company/insurance.

  • 3
    #2 has been my experience in several US jobs. My insurance has always started on the first of the next month, and that's ok because my previous employer's insurance always ran through the end of the month in which I left. An additional factor, related to 2, is simple administrative efficiency and scheduling; the company does a bulk submission of updates once a month and the insurance company processes them all (from all companies) at once. – Monica Cellio Aug 19 '13 at 14:49
4

The bigger companies, which self insure, can dictate that they will cover somebody from day 1. They don't have to, but they can. They will still require you to signup by a deadline, but will cover any expenses you have starting from day 1. The fact they self insure means that they have a more control over certain rules. They still use an insurance company to arrange doctors, hospitals and to process paperwork, so the card might take weeks to arrive but the coverage starts before the arrives.

Medium sized companies will not have the power to dictate the rules they want on the insurance company. Therefore they don't have the flexibility in this area. They will still give you a deadline to register, but will start coverage for new employees on a set schedule.

In some cases a boutique company could decide to cover an employee starting on day 1. Their size doesn't allow them to dictate to the insurance company the start date, they just cover the employee from corporate funds for that initial period. This is vary rare.

The reason why an insurance company likes a set schedule for the new employees is that is simplifies their processes. They know when they will process the accounts for the new employees, they know that they don't have additions every day of the month. They also don't have to bill for partial months.

In a related situation how companies handle the end of the employment. Some will continue your policy to the end of the month, others will end it on the last day of employment. Knowing before quitting is important to make sure that you don't count on insurance that isn't there or don't take advantage of the insurance that does exist.

I don't see how there are a large number of employees who find a job, get insurance and quit as soon as they get the expensive treatment. Just by chance there will be some, but it can't be a large number.

  • "The bigger companies, which self insure" I don't think I'd toss that blanket statement. I'd never heard of self-insured companies until 2 years ago, despite having worked for a variety of company sizes. I think it would be better to state "which may self-insure", with appropriate changes in the paragraph. Large companies that don't self-insure are also more likely to have control, but may also be inflexible because of their size. – David Navarre Aug 19 '13 at 20:11

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy